Green paper on Defined Benefit Pensions.

[theelench]

Did anyone else see reports on the recent Govt. Green Paper on Defined Benefit Pension Schemes?

It seemed to me that the main proposal was to legislate to allow companies with black holes in their pension schemes to change the indexing  from the RPI to the CPI (which is lower) if the RPI is "hard wired" into the scheme.  So pensioners would be getting lower pensions throughout the life of their retirement.

The article I read pointed out that many companies with black holes in their pension schemes are still paying out more in dividends than their contributions into the scheme.  That in many cases the schemes are not unsustainable and would not have an unrepairable black hole if the company made the necessary contributions and that they can well afford to make them.  But there was no mention of plans to force them to do so before implementing the change-over.

It looks to me that companies will be queueing up to do this if they are allowed to.  Millions of pensioners will be robbed of the pension levels they payed their contributions for in good faith if the goal posts are moved.

It looks to me that share holders will be protected and pensioners robbed to ensure that dividends don't fall.  Another case of the 10% protecting themselves at the expense of everyone else and grabbing yet more of the cake?

[cee-dee]

I don't know if most people are aware of how "pensions" are funded?

The contributions are not like "savings" where your own money is paid in, a small interest is paid and your savings are what you've paid in plus the added interest.

Pensions are funded by the contibutors payments being "invested", that is, the pension fund buys and sells using your contributions. What they buy and sell is "variable". They might buy property taking rent or they might buy property to sell (or both). They might also buy and sell shares too.

Now, those pension funds have an army of people (at various levels) all wanting to be paid!!!

Now then, if those "investments" don't go too well, that army of people still want paying.... So all things considered, it's no wonder there's "black holes" in pension schemes.

The investments are really only a form of gambling and whizz-kid investors are more liable to make risky investments as when they come off, the pay-back is pretty substantial. The whizz-kids make a name for themselves but their bosses come to expect those sorts of pay-backs all the time. The pressure eventually ensures that the whizz-kid investor eventually comes severely unstuck leaving the fund with a big loss. Trying to make up that loss leads to more risky investments...... and so it goes on.....

Some of those pension schemes that look good on paper would be fine if you could guarantee a continued "profit" by the investors.

"Nice and steady" investors who show a "nice and steady" profit are out of favour, the headline catching major coups by the whizz-kids are what investment shemes seem to favour these days?